Amid Layoffs, Fannie is Adding to Texas Servicing Staff
Washington-Last week the story du jour in Washington was the Obama administration's "maybe" plans to create a bad bank to buy billions worth of toxic mortgages (and other assets) to unclog the balance sheets of depositories everywhere.
But there was also the news that Fannie Mae would ask Treasury for $16 billion in new funding (so it could maintain a positive net worth) while laying off hundreds of workers.
The request for more taxpayer funds was disclosed by the GSE in a public filing. As for the layoffs, Fannie finally acknowledged them in a press release after a few members of the media - including a reporter from this newspaper - got wind that the GSE had laid off upwards of 900 workers since early December. As one company insider told Mortgage Servicing News, "There's been quiet job cuts going on for a while here." A former GSE worker added, "They didn't want to make any announcements until after the inauguration."
Fannie, which in the past has been known to hide its dirty laundry, wouldn't comment on just how many full-timers were let go, leaving it at a generic "hundreds." The company's PR department stressed that even though it was cutting heads it would wind up 2009 with just as many workers at year-end as it had in 2008.
The new hires would be mostly in Texas working on loan modifications. Those let go - which a source inside the company insisted was not 900 - include workers in communications, marketing, technology and what was left of its government affairs office.
In recent weeks, Freddie Mac has laid off workers, too, though it also declined to be specific on the head count. Marketing and communications were two areas being targeted said a source, requesting his name not be used. "At least they're offering (buyout) packages," he said.
As for the requests for additional funding from Treasury, Freddie so far has received $13.8 billion and is asking for another $35 billion. Add in the $13.8 billion for Fannie and the taxpayer tab soon will total $64.8 billion.
When the two were placed into conservatorships in early September the Treasury Department pledged up to $200 billion to keep both afloat - that is, operating with a positive net worth.
Regulators - and many legislators - still believe there's a role for Fannie and Freddie in the mortgage market but there's varying opinions on both how large they should be and what type of size limits should be placed on them. Their regulator, the Federal Housing Finance Agency, is now seeking public comments about their future role as mortgage investors, that is, their ability to portfolio loans and what benefits derive from such an activity. One regulatory source said the agency is going through this exercise "in the event they get out of this and become healthy again."
Together they hold $1.5 trillion in mortgage-related assets and guarantee $5 trillion held by outside investors, including banks and thrifts. About $400 billion of their on-balance-sheet holdings include subprime, alt-A and other nonconforming loan types. It's unlikely the private sector or government can (and will want to) take on their obligations. But as to where their fates lie, legislators likely will not address the futures of Fannie and Freddie this year. They have bigger fish to fry: the entire U.S. banking system.